PBL session 1 : Revenue cycle Part 1 Explain the purpose of each documents or reports below a) Deposit slip Showing

g the amount of the days receipts and forward this along with the checks to the bank. Upon deposit of the fund, the bank teller validates the deposit slip and return to the company for reconciliation. b) Remittance slip A means for verifying that customer checks and remittance advices match in amount. c) Cash receipt report Recorded all cash receipts transactions, including cash sales, miscellaneous cash receipt and cash receipt on account. d) Aging customer report List customer account balance by length of time outstanding. Useful for projecting future cash inflows related to sales, decide whether to increase credit limit for specific customers and for estimating bad debts.

Two possible threat under cash collections activities in revenue cycle. a) Handling cash or checks and authorizing credit memos. A person performing both of this duties could conceal theft of cash by creating a credit memo equal to amount stolen. b) Handling cash or checks and posting remittance to customer account A person performing both of these duties could commit the special types of embezzlement called lapping.

Part 2 Explain two strengths and two potential risks/exposures Strengths a. The remittance is filed alphabetically and chronologically. When the file is arrange like that, it is easy to check and review. It will take shorter time to search for debtors/customers file (remittance advice). b. Account receivable clerk balances the cash receipt with cash sales invoice. It is very important because it can prevent from missing any of customer transaction. Besides, errors can be detected such as error of omission made by office staff. Potential risks and exposure a. Avoiding missing transaction. Problems will occur when there is a missing transaction. For example, the company financial statement will not balance and besides the amount of incurred to the customer might be wrong. It will take some time to recheck and redo to record the transaction back. b. Errors can be made by clerk. Human is not like computer. When a work made by a person, it is expose to mistake. Therefore, by balancing the cash receipt with cash sales invoice every day is like a double checking system. It will prevent the missing transaction occur and also can detect any error earlier.

State and explain three weaknesses and three internal control procedures. Weaknesses 1) Cashier approved the credit sales. The sales invoice should be approved by higher authority employee. Cashier could adjust the sales invoice since he/she will make the all the three copy and give it to the customer. 2) Each department use different way to filed document. There is only one problem regarding to this problem, it is time. It is hard when the system on keeping the file is different for each department. For example, when a problem occur such as error of omission made, if the department filed document alphabetically we have to find according to customer name but if the department filed the document chronologically we have to find according to the date of transaction. 3) There is only one and employed sales clerk. This is not good. Since the clerk will performed the edit check and also presented the sales invoice to the customer. The clerk can steal the company moneys easily without anyone notice. Besides, the clerk also need a lot of work to do. What if there are a lot of customers, his/her work could give stress.

Internal control procedures 1) The company should employed someone to supervise the cashier. This could prevent from any adjustment from the cashier and hidden activities on stealing the companys asset. If the company dont want to hire someone, the job to approved the credit sales should be did by a higher authority person in the company. 2) The company should standardize the system in arranging and keeping the file. By standardizing the system, it can save some time of company business. For example, if there is any problem regarding customer transaction, if the company are using alphabetically system, find file according to the customers name and all department can easily and quickly present all transaction according to that customer. It can make the business run more effective and efficiently. 3) Segregation of duties. This is a good system compared to the existing system. It is because the segregation of duties makes sure that the system will run smoothly and it involves a group of employees. Therefore, it is hard for any employee to make any adjustment to companys file or customer information especially the amount.